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HOW THIS IS MONEY CAN HELP

Currently, customers earn 1 per cent on balances up to £1,000, 2 per cent up to £3,000 and 3 per cent if they have between £3,000 and £20,000.

By contrast, the average savings account pays just 0.3 per cent.

Yesterday it was revealed NatWest and RBS had sent some business customers letters giving notice that it may have to charge negative interest rates on current accounts.

It would force those running small companies and charity accounts to pay to keep money on deposit.

If Santander trims rates in the next few months it could coincide with the Bank of England cutting the base rate to 0.25 per cent, making it harder for savers to source alternatives.

It would also represent the second setback in seven months for those lured into the top-paying 123 deal, which offers cashback of up to 3 per cent on household bills. In January, Santander hiked the account's monthly fee from £2 a month to £5.

'It's hard to see where those affected might move their money to earn a higher rate. Being cynical, I suspect Santander realises this and wants to boost its profits - though it may face a backlash from annoyed customers.'

Troubling: Yesterday it was revealed NatWest and RBS had sent some customers letters giving notice that it may have to charge negative interest rates on current accounts

The 123 current account has proven a big hit with customers since it was launched in 2012.

It was also championed by Martin Lewis, the founder of Moneysavingexpert.

Official figures show that in the past two years Santander has pulled in 371,125 more customers than it has lost - most of whom will have signed up for the bank's 123 deal.

At least 3.8million people are thought to use the account.

It was the first bank account to offer cashback on household bills. You can earn 1 per cent cashback on water, council tax and Santander mortgage direct debits; 2 per cent on gas and electricity bills as well as 3 per cent on mobile, phone and broadband deals.

Santander says the average amount of cashback earned each year is £114. That is enough to cover the £60 annual cost of the account, with a little left over.

But the real selling point has been the generous interest paid on cash kept in the account.

As banks have slashed the rates on their dedicated savings accounts, many customers have switched to Santander and other banks, and building societies, such as Nationwide and TSB, which pay interest on some current accounts.

Customers who have kept £20,000 on deposit in Santander's 123 account since its launch in March 2012 could have earned as much as £2,630 in interest.

However, paying this interest has proved costly for the bank as more customers have flooded in.

In January, Santander blamed the large sums it was paying out in interest for increasing the 123 account's monthly fee. Now Money Mail understands that the bank feels the account is still not profitable enough - so the interest rate will have to be cut.

The plans we've been told about would hit those with larger sums in their account the most.

The account would pay a flat 2 per cent rate for all customers, instead of the current tiered interest, depending on how much cash is kept on deposit.

That would be a blow to those with more than £3,000 in their accounts, who currently earn the top 3 per cent rate. Someone with the maximum £20,000 kept in the 123 account would now be earning £600 a year at 3 per cent interest.

In the future, they may only earn £400 at 2 per cent - a loss of £200 a year.

Santander is expected to stress that those with smaller balances of under £1,000 will get a boost from the new deal.

For example, on a £999 balance, you would then earn £19.98 in interest instead of the £9.99 now on offer.

In a statement, Santander said no final decision had been made about the cuts.

However, it is believed that the company has submitted papers to City watchdog the Financial Conduct Authority, detailing its proposals.

This costs just £1 a month compared to the £5 on the full account. But customers do not earn any interest on the money in their account - just cashback.

Yesterday, a spokesman for Santander said: 'We do not comment on speculation.

'If we were to make a change to any of our banking products, including the 123 current account, we would write to our customers providing them with 60 days' notice.'

WHERE TO FIND THE BEST BANK DEALS

Santander, NatWest and RBS may be mulling over rate cuts, but some banks still offer good interest on current accounts.

The Club Lloyds account allows you to earn up to 4 pc interest, depending on your balance. You must put in £1,500 or pay a £5 fee every month.

TSB's Classic Plus account pays 5 per cent interest on balances of up to £2,000. You need to put £500 a month into the account and be registered for internet banking to qualify.pays 5 pc interest on balances of up to £2,000. You need to put £500 a month into the account and be registered for internet banking to qualify.

If you're looking for good customer service, First Directusually scores best, with Co-op not far behind.

Customers who want cashback can still sign up to NatWest's Reward Account. There's a £3 monthly fee, but it will pay 3 per cent cashback on seven different bills, including council tax, water and energy. You must pay by direct debit.

M&S Bank's current account will give customers a £100 gift card and reward points for shopping in M&S stores.

Barclays offers a £7 monthly reward if you pay in £800 a month. There's a £3 monthly fee and you get better deals on other Barclays products. Most reward accounts require two active direct debits to qualify.

For now, at least, Santander's 123 account not only pays between 1 and 3% interest on balances up to £20,000 but it also gives 1 to 3% cashback on bills. You need to pay a £5 a month fee, pay in £500 a month and have two active direct debits.